(h) Compensation.

For purposes of this chapter, the term "compensation" means cash benefits payable to individuals with respect to their unemployment.

(i) Employee.

For purposes of this chapter, the term "employee" includes an officer of a corporation, but such term does not include

(1) any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an independent contractor, or

(2) any individual (except an officer of a corporation) who is not an employee under such common law rules.

(j) State, United States, and citizen.

For purposes of this chapter

(1) State.

The term "State" includes the District of Columbia and the Commonwealth of Puerto Rico.

(2) United States.

The term "United States" when used in a geographical sense includes the States, the District of Columbia, and the Commonwealth of Puerto Rico.

An individual who is a citizen of the Commonwealth of Puerto Rico (but not otherwise a citizen of the United States) shall be considered for purposes of this section, as a citizen of the United States. (k) Agricultural labor.

For purposes of this chapter, the term "agricultural labor" includes all service performed

(1) on a farm, in the employ of any person, in connection with cultivating the soil, or in connection with raising or harvesting any agricultural or horticultural commodity, including the raising, shearing, feeding, caring for, training, and management of livestock, bees, poultry, and fur-bearing animals and wildlife;

(2) in the employ of the owner or tenant or other operator of a farm, in connection with the operation, management, conservation, improvement, or maintenance of such farm and its tools and equipment, or in salvaging timber or clearing land of brush and other debris left by a hurricane, if the major part of such service is performed on a farm;

(3) in connection with the production or harvesting of maple sirup or maple sugar or any commodity defined as an agricultural commodity in section 15 (g) of the Agricultural Marketing Act, as amended (46 Stat. 1550, § 3; 12 U. S. C. 1141j), or in connection with the raising or harvesting of mushrooms, or in connection with the hatching of poultry, or in connection with the ginning of cotton, or in connection with the operation or maintenance of ditches, canals, reservoirs, or waterways used exclusively for supplying and storing water for farming purposes; or

(4) in handling, planting, drying, packing, packaging, processing, freezing, grading, storing, or delivering to storage or to market or to a carrier for transportation to market, any agricultural or horticultural commodity; but only if such service

is performed as an incident to ordinary farming operations or, in the case of fruits and vegetables, as an incident to the preparation of such fruits or vegetables for market. The provisions of this paragraph shall not be deemed to be applicable with respect to service performed in connection with commercial canning or commercial freezing or in connection with any agricultural or horticultural commodity after its delivery to a terminal market for distribution for consumption. As used in this subsection, the term "farm" includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards.

(1) Repealed. Sept. 1, 1954, ch. 1212, § 4 (c), 68 Stat. 1135.

(m) American vessel and aircraft.

For purposes of this chapter, the term "American vessel" means any vessel documented or numbered under the laws of the United States; and includes any vessel which is neither documented or numbered under the laws of the United States nor documented under the laws of any foreign country, if its crew is employed solely by one or more citizens or residents of the United States or corporations organized under the laws of the United States or of any State; and the term "American aircraft” means an aircraft registered under the laws of the United States. (n) Vessels operated by general agents of United States.

Notwithstanding the provisions of subsection (c) (6), service performed on or after July 1, 1953, by officers and members of the crew of a vessel which would otherwise be included as employment under subsection (c) shall not be excluded by reason of the fact that it is performed on or in connection with an American vessel

(1) owned by or bareboat chartered to the United States and

(2) whose business is conducted by a general agent of the Secretary of Commerce. For purposes of this chapter, each such general agent shall be considered a legal entity in his capacity as such general agent, separate and distinct from his identity as a person employing individuals on his own account, and the officers and members of the crew of such an American vessel whose business is conducted by a general agent of the Secretary of Commerce shall be deemed to be performing services for such general agent rather than the United States. Each such general agent who in his capacity as such is an employer within the meaning of subsection (a) shall be subject to all the requirements imposed upon an employer under this chapter with respect to service which constitutes employment by reason of this subsection. (Aug. 16, 1954, ch. 736, 68A Stat. 447; Sept. 1, 1954, ch. 1212, §§ 1, 4(c), 68 Stat. 1130, 1135; June 25, 1959, Pub. L. 86-70, § 22(a), 73 Stat. 146; July 12, 1960, Pub. L. 86–624, § 18(d), 74 Stat. 417; Sept. 13, 1960, Pub. L. 86–778, title V, §§ 531 (c), 532-534, 543(a), 74 Stat. 983, 984, 986; Sept. 21, 1961, Pub. L. 87-256, § 110(f), 75 Stat. 537; Oct. 10, 1962, Pub. L. 87-792, § 7(k), 76 Stat. 830; Oct. 13, 1964, Pub. L. 88-650, § 4(c), 78 Stat. 1077.)

REFERENCES IN TEXT

Section 101(a)(15) of the Immigration and Nationality Act, as amended, referred to in subsec. (c) (18), is classifiled to section 1101 (a) (15) of Title 8, Aliens and Nationality.

Section 903 (c) (2) of the Social Security Act, referred to in subsec. (f) (2), is classified to section 1103 (c) (2) of Title 42, The Public Health and Welfare.

AMENDMENTS

1964- Subsec. (b). Pub. L. 88-650 added par. (9). 1962 Subsec. (b) (5). Pub. L. 87-792 substituted "is a plan described in section 403 (a)" for "meets the requirements of section 401(a) (3), (4), (5), and (6)" in subpar. (B), and added subpar. (C).

1961-Subsec. (c) (18). Pub. L. 87-256 added subsec. (c) (18).

1960 Subsec. (c). Pub. L. 86-778, § 532 (a), included employment on or in connection with an American aircraft within cl. (B) of the opening provisions.

Subsec. (c) (4). Pub. L. 86–778, § 532 (b), excluded service performed on or in connection with an aircraft that is not an American aircraft.

Subsec. (c) (6). Pub. L. 86-778, § 531 (c), substituted "wholly or partially owned" for "wholly owned" in cl. (A), and inserted words "which specifically refers to such section (or the corresponding section of prior law) in granting such exemption” in cl. (B).

Subsec. (c) (8). Pub. L. 86-778, § 533, substituted "service performed in the employ of a religious, charitable, educational, or other organization described in section 501(c)(3) which is exempt from income tax under section 501(a)" for "service perforced in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation."

Subsec. (c) (10). Pub. L. 86-778, § 534, eliminated provisions which excepted from the definition of the term "employment" service in connection with the collection of dues or premiums for a fraternal beneficiary society, order, or association which is performed away from the home office or is ritualistic service in connection with any such society, order, or association, service performed in the employ of an agricultural or horticultural organization described in section 501(c)(5) of this title, service performed in the employ of a voluntary employees' beneficiary association providing for the payment of life, sick, accident, or other benefits to members or their dependents or designated beneficiaries, and service performed in the employ of a school, college, or university, not exempt from income tax under section 501 (a) of this title if such service is performed by a student who is enrolled and regularly attending classes.

Subsec. (1). Pub. L. 86-778, § 543 (a), included the Commonwealth of Puerto Rico and eliminated the word "Hawali" from the definition of "State", defined the term "United States", and inserted provisions requiring an individual who is a citizen of the Commonwealth of Puerto Rico (but not otherwise a citizen of the United States) to be considered for purposes of this section, as a citizen of the United States.

Pub. L. 86-624 eliminated "Hawail, and" preceding "the District of Columbia."

Subsec. (m). Pub. L. 86–778, § 532(c), included aircraft in the catchline and defined the term "American aircraft."

1959-Subsec. (J). Pub. L. 86-70 eliminated "Alaska," preceding "Hawaii."

1954 - Subsec. (a). Act Sept. 1, 1954, changed "definition of employer from "eight or more" to "4 or more". Subsec. (1). Act Sept. 1, 1954, repealed subsec. (1) which related to certain employees of Bonneville Power Administrator.

EFFECTIVE DATE OF 1964 AMENDMENT Subsec. (b) (9) of this section applicable with respect to remuneration paid on or after the first day of the first

calendar month which begins more than ten days after Oct. 13, 1964, see section 4(c) of Pub. L. 88-650, set out as a note under section 3121 of this title.

EFFECTIVE DATE OF 1962 AMENDMENT Amendment of section by Pub. L. 87-792 applicable to taxable years beginning after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a note under section 37 of this title.

EFFECTIVE DATE OF 1961 AMENDMENT Amendment of section by Pub. L. 87-256 applicable with respect to service performed after Dec. 31, 1961, see section 110(h) (3) of Pub. L. 87-256, set out as a note under section 3121 of this title.

EFFECTIVE DATE OF 1960 AMENDMENTS Amendment of subsecs. (c), (c) (4), (6), (8), (10), and (m) of this section by Pub. L. 86-778 applicable with respect to remuneration paid after 1961 for services performed after 1961, see section 535 of Pub. L. 86-778, set out as a note under section 3305 of this title.

Section 543 (a) of Pub. L. 86–778 provided in part that the amendment of subsec. (1) of this section by Pub. L. 86-778 shall be effective with respect to remuneration paid after Dec. 31, 1960, for services performed after such date.

Amendment of subsec. (1) by Pub. L. 86-624 effective on August 21, 1959, see section 18(k) of Pub. L. 86-624, set out as a note under section 2202 of this title.

EFFECTIVE DATE OF 1959 AMENDMENT Amendment of section by Pub. L. 86-70 effective Jan. 3, 1959, see section 22(1) of Pub. L. 86–70, set out as a note under section 2202 of this title.

EFFECTIVE DATE of 1954 AMENDMENTS

Section 1 of act Sept. 1, 1954, provided in part that the amendment of subsec. (a) shall take effect with respect to services performed after Dec. 31, 1955.

Section 4 (c) of act Sept. 1, 1954, provided in part that the repeal of subsec. (1) shall be effective with respect to services performed after Dec. 31, 1954.

APPLICABILITY TO FEDERAL LAND BANKS, FEDERAL INTERMEDIATE CREDIT BANKS, AND BANKS FOR COOPERATIVES Applicability of subsec. (c) (6) of this section to Federal land banks, Federal intermediate credit banks, and banks for cooperatives, see section 531(g) of Pub. L. 86-778, set out as a note under section 3305 of this title.

§ 3307. Deductions as constructive payments.

Whenever under this chapter or any act of Congress, or under the law of any State, an employer is required or permitted to deduct any amount from the remuneration of an employee and to pay the amount deducted to the United States, a State, or any political subdivision thereof, then for purposes of this chapter the amount so deducted shall be considered to have been paid to the employee at the time of such deduction. (Aug. 16, 1954, ch. 736, 68A Stat. 454.)

§ 3308. Instrumentalities of the United States.

Notwithstanding any other provision of law (whether enacted before or after the enactment of this section) which grants to any instrumentality of the United States an exemption from taxation, such instrumentality shall not be exempt from the tax imposed by section 3301 unless such other provision of law grants a specific exemption, by reference to section 3301 (or the corresponding section of prior law), from the tax imposed by such section. (Added Pub. L. 86-778, title V, § 531(d) (1), Sept. 13, 1960, 74 Stat. 983.)

§ 3401. Definitions.

(a) Wages.

For purposes of this chapter, the term "wages" means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash; except that such term shall not include remuneration paid

(1) for active service as a member of the Armed Forces of the United States performed in a month for which such member is entitled to the benefits of section 112; or

(2) for agricultural labor (as defined in section 3121 (g)); or

(3) for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority; or

(4) for service not in the course of the employer's trade or business performed in any calendar quarter by an employee, unless the cash remuneration paid for such service is $50 or more and such service is performed by an individual who is regularly employed by such employer to perform such service. For purposes of this paragraph, an individual shall be deemed to be regularly employed by an employer during a calendar quarter only if—

(A) on each of some 24 days during such quarter such individual performs for such employer for some portion of the day service not in the course of the employer's trade or business;

or

B) such individual was regularly employed (as determined under subparagraph (A)) by such employer in the performance of such service during the preceding calendar quarter; or

(5) for services by a citizen or resident of the United States for a foreign government or an international organization; or

(6) for services performed by a nonresident alien individual, other than

(A) a resident of a contiguous country who enters and leaves the United States at frequent intervals; or

(B) a resident of Puerto Rico if such services are performed as an employee of the United States or any agency thereof; or

(C) an individual who is temporarily present in the United States as a nonimmigrant under subparagraph (F) or (J) of section 101(a) (15) of the Immigration and Nationality Act, as amended, if such remuneration is exempt, under section 1441 (c) (4) (B), from deduction and withholding under section 1441 (a), and is not exempt from taxation under section 872(b) (3),

or

(7) for such services, performed by a nonresident alien individual who is a resident of a contiguous country and who enters and leaves the United States at frequent intervals, as may be designated by regulations prescribed by the Secretary or his delegate; or

(8) (A) for services for an employer (other than the United States or any agency thereof)—

(i) performed by a citizen of the United States if, at the time of the payment of such remuneration, it is reasonable to believe that such remuneration will be excluded from gross income under section 911; or

(ii) performed in a foreign country or in a possession of United States by such a citizen if, at the time of the payment of such remuneration, the employer is required by the law of any foreign country or possession of the United States to withhold income tax upon such remuneration; or

(B) for services for an employer (other than the United States or any agency thereof) performed by a citizen of the United States within a possession of the United States (other than Puerto Rico), if it is reasonable to believe that at least 80 percent of the remuneration to be paid to the employee by such employer during the calendar year will be for such services; or

(C) for services for an employer (other than the United States or any agency thereof) performed by a citizen of the United States within Puerto Rico, if it is reasonable to believe that during the entire calendar year the employee will be a bona fide resident of Puerto Rico; or

(9) for services performed by a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry or by a member of a religious order in the exercise of duties required by such order; or

(10) (A) for services performed by an individual under the age of 18 in the delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution; or

(B) for services performed by an individual in, and at the time of, the sale of newspapers or

magazines to ultimate consumers, under an arrangement under which the newspapers or magazines are to be sold by him at a fixed price, his compensation being based on the retention of the excess of such price over the amount at which the newspapers or magazines are charged to him, whether or not he is guaranteed a minimum amount of compensation for such services, or is entitled to be credited with the unsold newspapers or magazines turned back; or

(11) for services not in the course of the employer's trade or business, to the extent paid in any medium other than cash; or

(12) to, or on behalf of, an employee or his beneficiary

(A) from or to a trust described in section 401 (a) which is exempt from tax under section 501 (a) at the time of such payment unless such payment is made to an employee of the trust as remuneration for services rendered as such employee and not as a beneficiary of the trust; or (B) under or to an annuity plan which, at the time of such payment, is a plan described in section 403 (a); or

(C) under or to a bond purchase plan which, at the time of such payment, is a qualified bond purchase plan described in section 405(a).

(13) pursuant to any provision of law other than section 5(c) or 6(1) of the Peace Corps Act, for service performed as a volunteer or volunteer leader within the meaning of such Act; or

(14) in the form of group-term life insurance on the life of an employee; or

(15) to or on behalf of an employee if (and to the extent that) at the time of the payment of such remuneration it is reasonable to believe that a corresponding deduction is allowable under section 217.

(b) Payroll period.

For purposes of this chapter, the term "payroll period" means a period for which a payment of wages is ordinarily made to the employee by his employer, and the term "miscellaneous payroll period" means a payroll period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll period.

(c) Employee.

For purposes of this chapter, the term "employee" includes an officer, employee, or elected official of the United States, a State, Territory, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term "employee" also includes an officer of a corporation.

(d) Employer.

For purposes of this chapter, the term "employer" means the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person, except that

(1) if the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services, the term "employer" (except for purposes of subsection (a)) means the person having control of the payment of such wages, and

(2) in the case of a person paying wages on behalf of a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in trade or business within the United States, the term "employer" (except for purposes of subsection (a)) means such person.

(e) Number of withholding exemptions claimed.

For purposes of this chapter, the term "number of withholding exemptions claimed" means the number of withholding exemptions claimed in a withholding exemption certificate in effect under section 3402 (f), or in effect under the corresponding section of prior law, except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero. (Aug. 16, 1954, ch. 736, 68A Stat. 455; Aug. 9, 1955, ch. 681, 69 Stat. 616; Sept. 21, 1961, Pub. L. 87-256, § 110 (g) (1), 75 Stat. 537; Sept. 22, 1961, Pub. L. 87-293, title II, § 201(c), 75 Stat. 625; Oct. 10, 1962, Pub. L. 87-792, § 7(1), 76 Stat. 830; Feb. 26, 1964, Pub. L. 88272, title II, §§ 204(b), 213(c), 78 Stat. 36, 52.)

REFERENCES IN TEXT

Section 101 (a) (15) of the Immigration and Nationality Act, as amended, referred to in subsec. (a) (6) (C), is classified to section 1101(a)(15) of Title 8, Aliens and Nationality.

Sections 5(c) and 6(1) of the Peace Corps Act, referred to in subsec. (a) (13), are sections 5(c) and 6(1) of Pub. L. 87-293, which are classified to sections 2504 (c) and 2505 (1) of Title 22, Foreign Relations and Intercourse, respectively.

Such Act, referred to in subsec. (a) (13), refers to the Peace Corps Act, which is classified to chapter 34 of Title 22, Foreign Relations and Intercourse.

AMENDMENTS

1964 Subsec. (a) (14), (15). Pub. L. 88-272 added pars. (14) and (15).

1962-Subsec. (a) (12). Pub. L. 87-792 substituted "is a plan described in section 403 (a)" for "meets the requirements of section 401(a) (3), (4), (5), and (6)", in subpar. (B), and added subpar. (C). 1961-Subsec. (a) (6).

(C).

Pub. L. 87-256 added subpar.

Subsec. (a) (13). Pub. L. 87-293 added subsec. (a) (13). 1955-Subsec. (a). Act Aug. 9, 1955, excluded from definition of wages, remuneration paid for services performed in a possession of the United States by a United States citizen if the employer is required by the law of the possession to withhold income tax on the remuneration.

EFFECTIVE DATE OF 1964 AMENDMENT

Par. (14) of subsec. (a) applicable to remuneration paid after Dec. 31, 1963, in the form of group-term life insurance provided after such date, see section 204(d) of Pub. L. 88-272, set out as a note under section 79 of this title.

Par. (15) of subsec. (a) applicable to remuneration paid after the seventh day following Feb. 26, 1964, see section 213 (d) of Pub. L. 88-272, set out as a note under section 62 of this title.

EFFECTIVE Date of 1962 AMENDMENT Amendment of section by Pub. L. 87-792 applicable to taxable years beginning after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a note under section 37 of this title.

EFFECTIVE DATE OF 1961 AMENDMENTS Amendment of this section by Pub. L. 87-293 applicable with respect to remuneration paid after Sept. 22, 1961, see section 201 (d) of Pub. L. 87-293, set out as a note under section 912 of this title.

Section 110(h) (4) of Pub. L. 87-256 provided that: "The amendments made by subsection (g) of this section [to this section and section 3402 of this title] shall apply with respect to wages paid after December 31, 1961."

CROSS REFERENCES Effective date of this subtitle, see section 7851 (a) (3) of this title.

§ 3402. Income tax collected at source.

(a) Requirement of withholding.

Every employer making payment of wages shall deduct and withhold upon such wages (except as provided in subsection (j)) a tax equal to 14 percent of the amount by which the wages exceed the number of withholding exemptions claimed, multiplied by the amount of one such exemption as shown in subsection (b) (1).

(b) Percentage method of withholding.

(1) The table referred to in subsection (a) is as follows:

(2) If wages are paid with respect to a period which is not a payroll period, the withholding exemption allowable with respect to each payment of such wages shall be the exemption allowed for a miscellaneous payroll period containing a number of days (including Sundays and holidays) equal to the number of days in the period with respect to which such wages are paid.

(3) In any case in which wages are paid by an employer without regard to any payroll period or other period, the withholding exemption allowable with respect to each payment of such wages shall be the exemption allowed for a miscellaneous payroll period containing a number of days equal to the number of days (including Sundays and holidays) which have elapsed since the date of the last payment of such wages by such employer during the calendar year, or the date of commencement of employment with such employer during such year, or January 1 of such year, whichever is the later.

(4) In any case in which the period, or the time described in paragraph (3), in respect of any wages is less than one week, the Secretary or his delegate, under regulations prescribed by him, may authorize an employer, in computing the tax required to be deducted and withheld, to use the excess of the aggregate of the wages paid to the employee during the calendar week over the withholding exemption allowed by this subsection for a weekly payroll period.

(5) In determining the amount to be deducted and withheld under this subsection, the wages may, at the election of the employer, be computed to the nearest dollar.

(c) Wage bracket withholding.

(1) At the election of the employer with respect to any employee, the employer shall deduct and

withhold upon the wages paid to such employee a tax determined in accordance with the following tables, which shall be in lieu of the tax required to be deducted and withheld under subsection (a): (2) If wages are paid with respect to a period which is not a payroll period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days (including Sundays and holidays) equal to the number of days in the period with respect to which such wages are paid. (3) In any case in which wages are paid by an employer without regard to any payroll period or other period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days equal to the number of days (including Sundays and holidays) which have elapsed since the date of the last payment of such wages by such employer during the calendar year, or the date of commencement of employment with such employer during such year, or January 1 of such year, whichever is the later.

(4) In any case in which the period, or the time described in paragraph (3), in respect of any wages is less than one week, the Secretary or his delegate, under regulations prescribed by him, may authorize an employer to determine the amount to be deducted and withheld under the tables applicable in the case of a weekly payroll period, in which case the aggregate of the wages paid to the employee during the calendar week shall be considered the weekly wages.

(5) If the wages exceed the highest wage bracket, in determining the amount to be deducted and withheld under this subsection, the wages may, at the election of the employer, be computed to the nearest dollar.

(d) Tax paid by recipient.

If the employer, in violation of the provisions of this chapter, fails to deduct and withhold the tax under this chapter, and thereafter the tax against which such tax may be credited is paid, the tax so required to be deducted and withheld shall not be collected from the employer; but this subsection shall in no case relieve the employer from liability for any penalties or additions to the tax otherwise applicable in respect of such failure to deduct and withhold.

(e) Included and excluded wages.

If the remuneration paid by an employer to an employee for services performed during one-half or more of any payroll period of not more than 31 consecutive days constitutes wages, all the remuneration paid by such employer to such employee for such period shall be deemed to be wages; but if the remuneration paid by an employer to an employee for services performed during more than one-half of any such payroll period does not constitute wages, then none of the remuneration paid by such employer to such employee for such period shall be deemed to be wages.